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Technology Stocks : eBay - Superb Internet Business Model -- Ignore unavailable to you. Want to Upgrade?

To: Steve Smith who wrote (1106)	12/18/1998 12:52:00 AM
From: Scott Burns	Read Replies (4) \| Respond to of 7772

Here's my take. When I first heard that Ebay was coming out as an IPO, I wanted in. They were "the" auction on the internet up until recently. When I saw what happened to the price after the IPO, I was regretting not buying some. And then it skyrocketed. And that's when I started realizing how irrational people were being. True, it deserves more than the average valuation due to the high growth every internet stock is experiencing. But this stock is different than Amazon or AOL. What are the barriers to competition? There are virtually none. Amazon has to keep a massive inventory of stuff if they want to stay competitive. AOL has been around for years and has an enormous customer and content-provider base. What does Ebay need to run its day to day operations? A group of people to manage their system and make decisions here and there. It isn't much, comparatively speaking. Hence, you're seeing everyone and their brother starting their own auction site including some of the big boys (Yahoo, et al.). I know Ebay was the first and the biggest and therefore has some leverage as far as that goes. But I was looking at their 1998 and 1999 p/e's and comparing them to some other names. The high estimate for both years is about 19 cents. That gives them a forward looking p/e of 1250 or so. I know, I know, supposedly these companies cannot be valued using the "traditional" methods like p/e's. But for old times sake, it's p/e is 14 times that of Cisco, 19 times that of Microsoft, and 18 times that of Dell. And these are the type of companies that demand a premium for shares of their stock. In addition, the Ebay insiders have been prohibited from selling (due to the recent IPO), so the small float and the internet euphoria has kept the price climbing. When they are allowed to sell (there is some controversy as to when this can happen), I would suspect we will see some downside pressure. One more point: if they make one major mistake, get sued, etc, the stock is begging for a correction. On the flip side, though, it seems like there have been a couple of problems as of late--system outages, customer relation problems, and things of the like which haven't adversely affected the stock price. Because of all of these reasons, I'm short on the stock. I'm not writing this to get people to jump on the bandwagon, but I just wanted to share my honest view. If people agree, great. Any criticism would be appreciated as well. By the way, I'm really glad this board is not like the Yahoo board with a bunch of people hyping everything under the sun and writing nonsense. Keep it up, Scott